Incorporating Both Undesirable Outputs and Uncontrollable Variables into DEA: the Performance of Chinese Coal-Fired Power Plants

There are two difficulties in doing an objective evaluation of the performance of decision-making units (DMUs). The first one is how to treat undesirable outputs jointly produced with the desirable outputs, and the second one is how to treat uncontrollable variables, which often capture the impact of the operating environment. Given difficulties in both model construction and data availability, very few published papers simultaneously consider the above two problems. This article attempts to do so by proposing six DEA-based performance evaluation models based on a research sample of the Chinese coal-fired power plants. The finding of this paper not only contributes for the performance measurement methodology, but also has policy implications for the Chinese coal-fired power sector

Incorporating Undesirable Outputs into Malmquist TFP Index: Environmental Performance Growth of Chinese Coal-Fired Power Plants

In this article we examine the effects of undesirable outputs on the Malmquist TFP indices. Our empirical work uses an unbalanced panel which covers 796 utility and non-utility coal-fired power plants in China during 1996-2002. In order to meet the requirement of a balanced panel for calculating the Malmquist indices, an innovative fake unit approach has been introduced. Our final results show that (1) the growth of the Chinese electricity heavily depends upon an increase of resource input; and (2) huge potential remains with regards to the efficiency improvement and emissions control in Chinese coal-fired power plants